Governor set to introduce large tax cuts

Plan represents biggest reduction in state history

January 27, 2006|By John Kennedy, Tallahassee Bureau Chief

TALLAHASSEE -- Gov. Jeb Bush is expected next week to propose the biggest tax-cut package in state history, including a property-tax reduction that would save most homeowners less than $100 a year but mean millions of dollars to large landowners.

The $1.5 billion proposal also will include a roughly $500 million sales-tax holiday similar to one unveiled earlier this month by House leaders, along with a host of smaller cuts, said those familiar with the plan.

The cuts are meant to cap Bush's final year as the state's chief executive and boost his Republican Party's standing in a pivotal election year.

Central to Bush's plan is about $500 million in a property-tax reduction that could save the owner of a home assessed at $300,000 about $80 a year.

The cut, however, could save Orange County's biggest landowner, Walt Disney World, about $1.6 million annually; Universal Orlando more than $400,000; and the Marriott hotel chain about $200,000 in the Orlando area alone.

Bush wouldn't confirm details of the plan, saying only that "in terms of our recommendations, we'll have a pretty bold proposal." He is expected to include the tax breaks as part of the budget recommendation he will unveil to lawmakers Wednesday.

Bush's bonanza is in keeping with his first seven years as governor, during which he has signed into law $14.2 billion in cuts. The tax slashing was made easier by Florida's driving economy.

This year, the state's hot real-estate market has combined with hurricane rebuilding to pour $3.2 billion in unanticipated tax receipts into the state's now $63 billion budget. With so much money, cutting taxes is an obvious choice for Bush as he looks to cement the GOP's hold on state government, allies say.

"We either refund the money or grow the base of government," said Senate President Tom Lee, R-Brandon. "And I don't think the Legislature has much of an appetite for that."

The vast amount of dollars now pouring into state coffers is even sparking tax-break talk from Democrats, who have long blistered the governor's tax-cutting approach for favoring wealthier Floridians over lower-income residents.

When House Republicans unveiled their sales-tax holiday plan -- a weeklong break on items costing up to $5,000 -- Democrats condemned it as a gimmick. But they also countered with their own tax cut.

Democrats said it made more sense to give $100 to every homeowner in the state to offset rising property taxes and insurance rates.

Instead of homeowners getting "6 cents on the dollar they spend for pencils, they're going to get $100," said Rep. Dan Gelber, D-Miami Beach.

But others say it's wrong to take any big pot of money away from other needs in Florida.

The state's outstanding debt is $22.5 billion, more than double what it was 10 years ago. Class-size requirements and meeting the goals of growth-management legislation approved last spring also demand billions of dollars in state revenue, critics said.

U.S. Rep. Jim Davis, a Tampa Democrat seeking his party's nomination for governor, was among those who took issue even with his own party's tax-cut ideas.

"I would urge the governor and every legislator to spend some time on the highways of this state and experience the traffic and then visit the crowded schools before they think about cutting taxes," Davis said.

Bush, though, is clearly looking to make a statement. As a first-year governor in 1999, Bush OK'd a $1 billion tax cut approved by the Republican-led Legislature, which still stands as the state's record one-year reduction.

But in crafting his final budget proposal to lawmakers, Bush is returning to familiar themes.

The property-tax cut he will propose would reduce the tax that school districts must charge to get matching money from the state. The so-called required local effort would go down by about 30 cents per $1,000 of assessed value.

That tax was last cut by lawmakers in 1999. Since then, Bush and the Legislature have grown increasingly reliant on this money to round out annual $1 billion increases in school funding approved in recent years.

But Florida's property-tax roll has mushroomed to $1.6 trillion this year, a stunning 19 percent increase from 2005. For Bush, this means the state's existing school-tax rate can be reduced and the amount of money rolling in will still far exceed last year's dollars.

With payers of property taxes getting a break, the share of state general revenue going to schools would increase in the Bush proposal, which lawmakers will consider when budget work begins in earnest. The Legislature's two-month session begins March 7.

"Sure, it would've been nice to use that $500 million to do other things in education like recruit teachers, provide pay increases and bring more resources into the classroom," said Wayne Blanton, executive director of the Florida School Boards Association. "But I understand the political reality of what's going on. This is the governor's last year, and it's an election year."

The remainder of Bush's tax-break package is expected to include:

Elimination of the state's intangibles tax on investments, paid by some of Florida's wealthiest residents.

Erasing a per-drink tax on alcoholic beverages, long opposed by the politically connected Florida Restaurant Association.

Additional sales-tax holidays for hurricane preparation and other purchases.

Cuts for some manufacturers and the industrial use of hydrogen fuel.

Hank Fishkind, an Orlando economist, said the tax-cut frenzy is understandable in a year of plenty -- but not advisable for the long haul.

"It's not good economics," Fishkind said. "Investing in roads, schools and what Florida needs is what's going to have a more lasting impact."